Australian currency falls on central bank’s policy statement
By Deborah Levine and William L. Watts, MarketWatch
NEW YORK (MarketWatch) — The dollar lost ground versus the euro and other major currencies Tuesday as better economic data from Europe supported the single currency.
The greenback was also undercut by a Chinese official’s warning against excessive U.S. asset holdings, strategists said.
The euro EURUSD +0.5145% touched $1.4682, its highest level since early May, but then slipped a bit to $1.4676, still solidly up from $1.4577 late Monday.
The dollar index DXY -0.48% , which measures the performance of the U.S. unit against a basket of six currencies, fell to 73.599 from 73.981 in late North American trading Monday. See real-time currency quotes and tools.
“Euro area retail sales and German factory orders surprised on the upside, a rare event in view of the numerous downside surprises received in recent days globally from various economic indicators,” said currency strategists at Barclays Capital.
German factory orders rose an unexpectedly strong 2.8% in April, exceeding forecasts for a 1.9% rise. A separate report said euro-zone retail sales climbed 0.9% in April, compared with economists’ forecast for a 0.3% increase.
With no major U.S. data on the calendar, Federal Reserve Chairman Ben Bernanke’s speech at 3:45 p.m. Eastern time may be the key event for markets.
However, Bernanke is unlikely to signal that a recent run of weaker-than-expected U.S. data represents more than a soft patch for the economy. Read about Bernanke's upcoming speech.
If Bernanke “sounds particularly concerned about the economy, especially the unemployment rate, then we could see bond yields drop and the dollar fall like a stone, crushing any hopes for a rebound in the greenback,” said Kathleen Brooks, research director at Forex.com, in emailed comments.
“On the other hand, if Bernanke sounds more relaxed about the data, then the dollar may find some support after coming under pressure today,” she said.
On balance, Brooks said Bernanke is likely to sound a note of caution, but say that it’s too early to speculate on the need for more monetary stimulus.
In contrast, traders do expect European Central Bank President Jean-Claude Trichet to signal that policy makers are prepared to deliver another rate hike in July, said Jeremy Stretch, currency strategist at CIBC World Markets. The ECB policy meeting is slated for Thursday.
After Trichet’s most recent news conference a month ago, the euro plunged 1.8%, when he defied expectations that he would hint at a rate hike this month, causing the market to push out the rate increase by a month to July. Read more on euro’s rebound.
During the Asian session, remarks attributed to a senior official at China’s State Administration of Foreign Exchange, or SAFE, contributed to the dollar’s softer tone, Stretch said.
